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Global Social Security NewsletterDecember 2015

Welcome to the December 2015 edition of our global social security newsletter, bringing you updates on changes in the social security regimes of various countries across the PwC network in the period from 1 September 2015 to date.

We hope that you enjoy reading the updates and as always, please feel free to contact us should you have any queries or require further clarification on any of the issues raised in the newsletter.

Regards

The PwC social security network

Bart Elias Social Security Leader - Europe, Middle East, Africa and India

Please visit our dedicated website for details on the social security regimes in place in over 100 countries in the PwC network: www.pwc.com/socialsecurity

Bart Elias, Partner Social Security Leader, EMEA +32 3 259 3156 [email protected]

John Kelly Editor +353 1 792 6072 [email protected]

Olan Deasy Editor +353 1 792 5802 [email protected]

Introduction

Global Social Security Newsletter 2

Contact

Countries & topics

3Global Social Security Newsletter

• Czech Republic

• Denmark

• France

• Hungary

• Ireland

• Latvia

• Netherlands

• Singapore

• Sweden

• Switzerland

• Uruguay

• EU/EEA Updates

• Bilateral Agreement Updates

Your country information


Czech Republic

Under current practice, the Czech social security authorities require individuals who worked outside the Czech Republic to confirm that they were subject to a foreign mandatory social security scheme during the period when they were not contributing to the Czech mandatory social security scheme.

Under current practice, the Czech social security authorities are now requesting official confirmation of foreign social security contribution and it is therefore recommended that individuals obtain evidence confirming their foreign social security contributions (e.g. E104 certificate) before they terminate their working activities abroad.

Denmark

Rise of the Pension Age and Increased Social Security Charges

The Danish Parliament is voting on a bill which will raise the statutory pension age from 67 to 68. The proposed change will only apply to individuals turning 67 in 2030 or later.

As individuals will now remain employed for a longer period of time, workplace insurance premiums will also rise. The premium for Danish industrial insurance as well as contributions to the labour market occupational diseases fund (AES) is therefore expected to increase in 2016 and onwards.

A1 Processing times substantially reduced

The Danish authorities have revised its procedures for issuing A1 certificates for persons working in two or more EU/EEA-countries (multi-state workers).

According to EU-rules, Denmark should issue a temporary decision for multi-state workers and send this to the authorities in the specific countries involved in each case. The receiving authorities may object to the Danish decision within two months.

When issuing A1-certificates for persons living in Denmark while working for a Danish employer only, the Danish authorities will no longer coordinate with liaison authorities in other EU/EEA countries before issuing the final decision. The two-month objection period will therefore no longer apply.

The revised procedure has reduced Danish processing times substantially and it will enable the Danish authorities to issue A1-certificates on a daily basis, however, this may result in the Danish A1s being challenged by foreign social security authorities. This is especially relevant for A1-certificates issued to short-term business visitors who work in other EU/EEA countries irregularly, as such individuals may not be considered muti-state workers by foreign social security authorities.

France

From 1 January 2016, all employers in the private sector will be required to provide their employees with a complementary medical insurance scheme under Law n°2013-504 of 14 June 2013. Employees must be covered under illness, maternity and accident insurance.

This complementary medical insurance scheme will top up the benefits provided for by the Social Security scheme. Employers are required to fund 50% of the scheme.

The complementary coverage may have been implemented via collective bargaining at industry or company level. If the complementary medical is not implemented via collective bargaining, it will have to be implemented unilaterally by employers.

Your country information


Hungary

From 1 January 2016, the following will come into effect:

• Hungarian residents who are not insured in the Hungarian social security system will pay a monthly healthcare service contribution except in cases where they are subject to the social security system of another treaty state. The amount of this contributions is HUF 7 050 per month as of 2016.

• As the Totalization Agreement with the US has not yet come into force, US assignees to Hungary are subject to Hungarian social security if their assignment does exceed the two years period.

• A new social tax allowance is available for companies employing individuals between the age of 25 - 55 in specific agricultural jobs. The rate of the social tax allowance is 14.5% up to HUF 100 000 monthly income. On the income exceeding this threshold, the company has to pay 27% social tax and 1.5% training fund contribution, the same as in general cases.

• The child tax base allowance will increase in cases of families with two children (15% of HUF 83 333 per child). This has also an impact on the related contribution allowance, that can be claimed in cases where the income level of the individual does not allow to claim for the whole amount of the child tax base allowance.

Ireland

The Social Welfare Act 2015 will give effect to a number of social protection measures from 1 January 2016.

A new tapered Pay Related Social Security (PRSI) credit has been introduced for employees insured under Class A whose earnings are between €352.01 and €424 in a week. Previously any employee whose earnings were over €352 in a week paid Class A contributions at 4%. This has now been increased to over €424 in a week with a tapered increase up to this rate for income

between €352.01 and €424 in a week. In other PRSI changes, the lower 8.5% Class A rate of employer PRSI will apply to weekly earnings up to €376 (up from €356) with effect from 1 January 2016.

The monthly rate of child benefit will be increased to €140 (up from €135). A €3 weekly increase has also been introduced in the pension for pensioners and carers aged 66 years or over.

EU updates


Latvia

Introduction of solidarity tax

From 1 January 2016, a new solidarity tax is to be introduced. The tax will be applied to both socially insured employees and self-employed individuals whose annual income exceeds the maximum amount of mandatory social insurance contributions i.e., the tax ceiling. The tax ceiling will be increased from EUR 48,600 (2015) to EUR 51,900 (2016) per annum. Solidarity tax will be payable at the same rates as social security contributions: 23.59% of gross remuneration paid by employer and 10.5% from gross remuneration paid by employee.

National insurance salary cap to rise in 2016

The Latvian secretaries of state met on 22 October 2015 to debate proposals for amending Cabinet Regulation No. 1478 of 17 December 2013 on the maximum amount subject to mandatory and voluntary national social insurance (NSI) contributions.

It is understood that the solidarity tax will be payable on any salary that exceeds €4,000 a month and that the NSI salary will be capped at €51,900. Accordingly, solidarity tax will be payable on any monthly salary exceeding €4,325. The proposed amendments are to come into force on 1 January 2016.

EU updates


Netherlands

Kik-case referred back to the Court of Appeals in Amsterdam for further investigation

On 9 October 2015, the Dutch Supreme Court ruled in the “Kik” case and decided to refer the case back to the Court of Appeals in Amsterdam. The case involves a Dutch resident who performs activities on board a sea-going pipe laying vessel flying a Panamese flag and being employed by a Swiss employer. The European Court of Justice issued their ruling in the “Kik” case on On 19 March 2015. They ruled that despite the fact that Mr Kik performed his activities outside EU-territory, sufficient bonds with the EU exist and that the social security legislation of the country where the employer of Mr Kik is located (Switzerland) should apply. In addition, the ECJ concluded that in case Swiss legislation does not provide mandatory social security coverage for individuals in the position of Mr Kik, the legislation of the residence state of the individual should apply (i.e. the Netherlands) in case this system does.

The Dutch Supreme Court instructed the Court of Appeals to further investigate to what extend Switzerland can state that their social security system does not mandatory cover individuals in the position of Mr Kik based on national legislation, in case the EU Regulation appoints the Swiss social security scheme as applicable. Moreover, it should be investigated to what extent Member States have the possibility to subsequently deviate from these rules and exclude employees from the appointed social security legislation based on national rules.

Opinion of the Dutch social security authorities about the outcome of the Kik-case under the rules of EU Regulation 883/2004

The Dutch authorities recently announced to apply the social security system of the state where the employer resides in a case like the Kik-case.

The result of the Kik-case is also of interest in respect of the (new) EU Regulation 883/2004, where a residual article is included. In the current procedure, the (old) EU Regulation 1408/71 was applicable. The question is now raised if the outcome of the “Kik” case will be the same under the rules of the (new) EU Regulation 883/2004. Based on the new residual article, the legislation of the residence state of the individual applies in case no other article covers the situation of the individual concerned. The Dutch authorities announced to apply the multi-state rules in scenarios where individuals reside in the EU, work on behalf of a Dutch employer and perform their activities outside the EU. This is in line with new national legislation in place as of 1 January 2015.

Discussion on working in two or more member states

On 30 October 2015, the Dutch Supreme Court raised questions to the European Court of Justice in two cases. The relevant question in both cases is what should be considered to be ‘working in two or more member states’ for the application of EU Regulations 1408/71 and 883/204. The decision of the ECJ should provide more clarity on the applicability of the rules for working in two or more member states. In the first case, it concerns the situation where an employee is only working occasionally in his home country, however this exceeds 5% of his working time. The other situation concerns an individual who takes up another employment in Austria during a period of unpaid leave from her Dutch employment. The ECJ is requested to rule on whether or not the rules for working in multiple countries would apply in these situations.

EU updates


Singapore

From 1 January 2016, the cap on the maximum rate of contributions (which is 20% for employees and 17% for employers), will increase. The annual employee contributions into CPF are currently capped at S$17,000 per annum, but will rise to S$20,400 per calendar year. Similarly, employer contributions into CPF are currently capped at S$14,450 per annum, but will rise to S$17,340 per calendar year.

These contribution rates will now apply to all Singapore citizen and Singapore Permanent Resident employees aged 55 and below (previously only applicable to those aged 50 and below).

Sweden

The Philippines – Sweden bilateral agreement

On 15 October 2015, an agreement on social security was signed between the Philippines and Sweden. This agreement covers only pension benefits. For other social security benefits domestic rules apply.

Before the agreement can come into force, the agreement must be approved by the Swedish Parliament and the corresponding in the Philippines. At this stage it is not known when it will come into force.

Switzerland

Swiss Old Age and Survivors’ Insurance (AHV), Disability Insurance (IV), and Income Compensation (EO)

From 1 January 2016, the contribution rate for the income compensation (EO) is to be reduced from 0.5% to 0.45% of gross income. The employer and employee portion is 0.225% each. From 1 January 2016 the total contribution to the AHV/IV/EO is therefore 10.25%:

Unemployment Insurance (ALV)

From 1 January 2016, the maximum insurable income for mandatory accident insurance will be increased from CHF 126’000 to CHF 148’200. The contribution rate for unemployment insurance (ALV) of 2.2% of the decisive income is due up to the threshold of CHF 148’200. For income portions over CHF 148’200 the contribution rate is 1% of the decisive income (uncapped).

Contribution rate of self-employed

From 1 January 2016, the contribution rate for AHV/IV/EO of self-employed will be 9.65%. For yearly income under CHF 9’400 there is a minimum contribution required of CHF 478.

Contributions of non-working persons

From 1 January 2016, the yearly AHV/IV/EO minimal contribution for non-working persons will be CHF 478 (previously CHF 480). The maximum yearly AHV/IV/EO contribution rate for non-working persons equals 50 times the minimal contribution and is therefore CHF 23’900 (previously CHF 24’000).

Mandatory accident insurance – insured income

The insured income according to the mandatory accident insurance (UVG) will be increased from CHF 126’000 to CHF 148’200

Contribution rate

Employer Employee Total

AHV 4.200% 4.200% 8.40%

IV 0.700% 0.700% 1.40%

EO 0.225% 0.225% 0.45%

Total 5.125% 5.125% 10.25%

EU updates


Uruguay

On 15 October 2015, the Administrative Court of Uruguay (“TCA”) passed judgement on a case brought by the Medical Institute of Cardiac Surgery (hereafter named as “MICS”). The case involved MICS requesting the annulment of a resolution issued by the Social Security Office (“BPS”), which stated that the doctors hired by the MICS should be considered employees and not independent contractors. Consequently, the BPS claimed that such doctors should pay social security contributions to BPS as employees and not to the Professional Pension Fund (“CJPPU”). Based on this argument, the BPS requested from MICS the payment of unpaid social security contributions of approximately one hundred million dollars.

The MICS maintained that it did not have an employee-employer relationship with the doctors, because the typical elements which constitute a labour relationship (such as subordination between employer and employee, labour sanctions, control from the employer, etc), did not apply to the service contract signed between the company and the doctors. On the other side, the BPS understood that doctors were payroll workers, based on some facts such as that the MICS provided the medical instruments, the equipment, the personnel and the patients.

The TCA ruled in favour of the MICS, based on legislation that permits this kind of relationship between companies and independent professionals. The TCA understood that doctors developed their activities as independent professionals, through a services agreement (with total autonomy and without subordination) and not as employees of the MICS. Thus, the resolution issued by BPS claiming social security contributions on the payments received by the doctors from the MICS was disregarded and declared null by the TCA.

Consequently, this judgement finally provides a TCA position on an old dispute between the Social Security Office’s opinion and the taxpayer’s opinion about the social security position of independent professionals.

EU/EEA Update


EU/EEA Updates

How to determine a person’s residence?

A case is currently pending before the Court of Justice of the European Union, which is to decide on how to determine where a person is resident under EU social security regulations.

The current case questions the lawfulness of British law requiring non-UK nationals to be lawfully resident in the UK in order to receive child benefits/tax credits. According to the Commission, the UK has violated the EU social security coordination rules by introducing a condition, under which “residence” is not only determined based on factual merits, i. e. work and family life but also on further legal qualifications.

The Advocate General has presented his opinion in the case, which concludes that the UK has not violated EU-rules.

The opinion of the Advocate General is in line with the current Practical guide (December 2013), which also accepts that the concept of “residence” provided in the EU social security rules may be supplemented by further conditions found in national law and/or in EU-law.

Should the EU Court accept the arguments of the Advocate General this may impose impracticalities in borderline cases as each Member State may have its own individual norms for determining residence in accordance with EU-law. Such norms may not be aligned and may therefore cause uncertainty as to where a person is socially secured.

In order for a company to be compliant towards social security, it is therefore advisable that a certificate of coverage (A1) is obtained before any cross-border activities are initiated. The application for a multi-state worker’s certificate should be sent to the authority in the Member State of residence. It may therefore be important to make a preliminary assessment of, where the employee is resident based on various EU and national requirements.

Bilateral agreement updates

Entered into force: Lithuania – Moldova 4 October 2015 Brazil - Korea (Rep.) 1 November 2015 Macedonia (FYR) - Slovak Republic 1 December 2015 Argentina – Belgium 1 January 2016

Signed: Australia – Estonia 14 September 2015 China (People’s Rep.) – Switzerland 30 September 2015 Bulgaria – Tunisia 1 October 2015 Albania - Czech Republic 13 October 2015 Philippines – Sweden 15 October 2015 Morocco – Tunisia 19 October 2015 Japan – Philippines 19 November 2015

Negotiations Austria - Brazil 14 September 2015 India – Ireland 29 September 2015 Australia – Serbia 25 September 2015 Italy – Moldova 12 October 2015 Albania – Austria 12 November 2015

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Bilateral agreement updates


global social security newsletter december 2015€¦ · global social security newsletter 4 czech...

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